Current developments in FinTech and FCMC support for industry players

Latvia is becoming an increasingly popular destination in Europe for FinTech companies – last year the venture capital company Index Ventures recognised Latvia as one of the start-up-friendly countries in Europe, FinTech companies operating in Latvia have successfully established companies in other countries and continents of the world.

What characterises the Latvian FinTech landscape and what is currently relevant in the regulation of the sector?

FinTech in Latvia

The Latvian FinTech landscape is diverse, and although the Latvian FinTech market is at an early stage of development, the sector is characterised by qualitative development. Currently, there are about 100 active FinTech companies in Latvia (including more than 400 start-ups) in various business segments, such as payment services, lending, investment platforms and crowdfunding platforms, as well as regulatory technology (RegTech) and data analytics services.

FinTech companies operating in Latvia have no geographical constraints, and they have successfully established companies (branches, representative offices) in other countries and continents of the world: Member States of the European Union, Switzerland, the United Kingdom, Africa, Asia, in particular in the areas of retail lending, payments and asset management.

FCMC’s Innovation Hub

In 2021, the Financial and Capital Market Commission (FCMC) continued to develop the FinTech environment by expanding its support instruments – the Innovation Hub and the Regulatory Sandbox. Last year, the number of consultations at the FCMC’s Innovation Hub has increased by 30% for existing and new companies and idea makers planning to develop innovative financial services in Latvia.

At the Innovation Hub, FCMC experts advise on licensing, supervision, anti-money laundering and other areas. Advice on the provision of payment services (29%) and crowdfunding (24%) dominated in 2021.

With technological developments in the financial sector, the number of companies active in the development of RegTech solutions has increased. Companies develop money-laundering risk management solutions, help automate the customer due diligence process and assessment of clients of financial institutions, check reputation and help develop credit risk assessment models. Last year, 18% of the advice provided by the Innovation Hub was in RegTech. There is also an interest in the provision of crypto-asset services (13% of advice).

In consultations, FCMC experts provide recommendations on preparation of documents for the licensing process, explain applicable regulation, provide guidance on compliance of innovative financial products, services or business models with licensing requirements, supervision and other regulatory enactments.

In 2021, the FCMC expanded the Innovation Hub through regular thematic activities and dialogue with market participants in the areas of payment services, crowdfunding and financial technology. Several hundred experts from the financial sector attended the seminars held by the FCMC last year. In addition, the FCMC experts shared their knowledge and experience in other events relevant to the FinTech sector.

Improved licensing process

In 2021, the FCMC reviewed the licensing process and introduced a new approach – pre-licensing evaluation in order to stimulate the development of the FinTech market. It is an opportunity for potential market participants to receive valuable guidance and recommendations already during the preparation of documents, thereby strengthening quality and reducing the time for further licensing. Licensing guides for crowdfunding and payment and e-money service providers have been established to facilitate understanding of the licensing process and are available on the FCMC website.

Market participants also have access to the FCMC Regulatory Sandbox, which provides testing of innovative financial products and services in a regulatory regime. The Sandbox gives the FCMC an opportunity to better understand financial service companies and technologies, as well as to identify and assess the risks associated with new services and business models that are not protected by the current regulation, and to ensure compliance with regulatory framework.

The Sandbox makes it possible to identify legal obstacles that hamper the development and stability of new services, as well as to strengthen the stability of the financial system and protect the interests of service users.

The FCMC continues to develop supervisory processes, e.g., in 2021 the FCMC strengthened the risk-based approach in the supervision of payment and e-money institutions by developing risk assessment models for participants to plan supervisory activities based on participants’ risk profiles.

Current regulation of FinTech

The cybersecurity situation in the financial sector is currently a major focus. Cybersecurity and risk management in the sector are the priorities for the FCMC in performing supervision in 2022, in particular in the use of outsourcing and cloud computing technologies. The work on the Digital Operational Resilience Act (DORA) is being currently performed along with European Union supervisors. DORA will cover a very wide range of financial institutions, including credit institutions, payment institutions, electronic money institutions, investment and investment firms, virtual asset service providers, alternative investment fund managers, insurance and reinsurance undertakings, insurance intermediaries, crowdfunding service providers. Importantly, DORA will lay down a number of additional requirements for incident reporting, security testing and third-party service management.

Another focus is the ongoing work in the EU on the single regulation of crypto-assets MiCA (Markets in Crypto-assets), which, once developed, will replace national frameworks for virtual assets.

We see great prospects in the provision of crypto-asset services. The MICA framework will facilitate cooperation between the countries, provide greater regulatory certainty for market participants engaged in cross-border activities, facilitate innovation and consumer choice in the area of financial services. A new framework for virtual assets will help to ensure a high level of consumer and investor protection, market integrity and financial stability, as well as to apply anti-money laundering requirements in relations between the players involved in virtual asset transactions.

The FCMC invites financial technology companies and potential market participants to dialogue and consultation at the Innovation Centre. You can apply for a consultation on the FCMC website by phone +371 67 774 922 or +371 67 774 853 or by email

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